While it is true that lenders are reluctant to lend money to those applicants who have been declared bankrupt in the recent past, it would be a mistake to think that approval is out of the question. Getting a personal loan after bankruptcy is really down to approaching the right lender and finding the right terms to suit the reality of your situation.
Of course, there is no denying that bankruptcy is a serious matter, and it is impossible to get excellent loan terms until credit status is recovered fully. But it is possible to secure approval despite low credit scores from lenders who are willing to accept the extra risk in the knowledge that the borrower benefits more from maintaining repayments than abandoning them.
But what can an applicant expect from a personal loan application process when they are beginning their recovery from bankruptcy? What is needed to convince the lender that their investment is safe?
Satisfying Qualification Requirements
The first step in submitting an application for a personal loan after bankruptcy that has any chance of success is to ensure all of the qualifying criteria are fully satisfied. This means that proof of a reliable source of income is necessary.
In most cases, lenders will only consider applicants that have a full-time job, and have held it for a minimum of 6 months prior to submitting their application. Admittedly, this is normal when seeking approval despite bad credit scores, but it is essential in this case because lenders need to know that repayments are possible.
Proving affordability is also essential, so it is a good idea to apply for only small personal loans. Even if $10,000 could be handled comfortably, only seek $5,000 to ensure the lender sees no issue at all with affordability.
The Terms To Look For
Obviously, the loan terms affect your chances of approval on a personal loan after bankruptcy. With that in mind, it is important to center attention on matters like interest rates and repayment periods. These can be crucial in establishing affordability.
For example, even if the interest rate is not great, a longer repayment period means that the size of the monthly repayments is smaller. This means the pressure to meet repayments is lower, and so getting approval despite low credit scores is much more likely.
Remember, however, that as an applicant seeking a first loan since bankruptcy, it is necessary to accept compromises that may seem expensive. But by repaying these personal loans without a hitch, the road to financial recovery is assured, so the extra expense is worth it.
Unsecured or Secured Loans
There are some other considerations too, not least whether to seek an unsecured or a secure loan. Without doubt, it is much harder to get an unsecured personal loan after bankruptcy, with the lack of assurance making more lenders reluctant to even consider approving the loan.
It is possible to get a small unsecured loan, but the terms may be too expensive to accept. A secured loan is much more likely to be approved because the lender is protected from any losses. It may be an idea to find a cosigner too, to offer a guarantee repayments will be made. This makes approval despite low credit scores almost certain.
Finally, there are ways to improve your credit reputation before seeking a personal loan. For example, get a secured credit card and made the necessary repayments on time. After just 6 months of regular repayments, lender will have a track record that indicates reliability.